A month has gone by since the last earnings report for Allison Transmission (ALSN Quick QuoteALSN - Free Report) . Shares have added about 0.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Allison Transmission due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.

ALSN Q2 Earnings Beat Estimates 

Allison reported adjusted earnings of $2.73 per share for the second quarter of 2026, up 19.2% year over year and above the Zacks Consensus Estimate of $2.60 by 5%. Quarterly revenues of $1,566 million jumped 92% and beat the consensus estimate of $1,508 million by 3.8%.

The top-line surge reflected the addition of Allison Off-Highway and record quarterly sales in the legacy Transmission unit. Defense revenue climbed 57% to $99 million, underscoring strength in a key growth market.

Acquisition Costs Pressure GAAP Profitability

Gross profit increased to $515 million from $403 million, primarily reflecting the addition of Allison Off-Highway. Gross margin was 32.9%. Selling, general and administrative expenses rose $64 million to $168 million, while engineering, research and development costs increased $13 million to $56 million.

GAAP net income declined $14 million to $181 million, while diluted earnings fell 6% to $2.15 per share. Higher operating costs tied to the acquisition, including increased depreciation and amortization, along with higher net interest expense and unrealized mark-to-market adjustments on marketable securities, weighed on results.

New Quarterly Sales Record

The Allison Transmission business generated net sales of $860 million, up 6% year over year. Segment operating profit was $281 million, or 32.7% of sales, while adjusted EBITDA totaled $318 million with a 37.0% margin.

North America on-highway sales rose 3% to $430 million, while outside North America on-highway sales fell 7% to $132 million. Global off-highway sales increased 38% to $22 million, and service parts, support equipment and other sales advanced 1% to $177 million. Recent defense wins included major programs with BAE Hägglunds, Arquus and General Dynamics European Land Systems.

Off-Highway Adds $706 Million of Sales

Allison Off-Highway recorded net sales of $706 million. Gross profit was $118 million, representing a 16.7% margin. Segment operating profit reached $47 million, or 6.7% of sales, while adjusted EBITDA was $104 million with a 14.7% margin.

Construction and material handling contributed $249 million, followed by agriculture and service parts, specialty and other at $152 million each. Industrial sales were $99 million and mining generated $54 million. Management cited strength in European construction and mining, while agriculture had yet to turn positive overall.

Synergy Plan Enters Execution Phase

The company continues to target $120 million of annual run-rate synergies from the Off-Highway acquisition. Procurement and logistics account for 60% of the expected savings, while operations and footprint optimization and SG&A and people initiatives each represent 20%.

Allison expects to capture 40% of the target by the end of 2027, 80% by the end of 2028 and the full amount by the end of 2029. Management said 90% of the identified synergies are already in the execution stage, with resource planning completed and capital appropriated.

Cash Flow Strengthens Deleveraging

Net cash provided by operating activities rose 70% year over year to $312 million. Adjusted free cash flow increased 84% to a quarterly record of $281 million. During the quarter, ALSN repaid the remaining $150 million under its revolving credit facility, repurchased $46 million of stock and paid a dividend of $0.29 per share.

The company ended June with $399 million in cash and cash equivalents and $995 million of available revolver capacity. Total debt was $4,114 million and net debt stood at $3,715 million, with management maintaining a near-term net leverage target of about 2.0 times.

Allison Raises 2026 Sales and Cash Outlook

For 2026, Allison now expects net sales of $5,800-$6,000 million, up from the previous estimate of $5,575-$5,925 million. Adjusted EBITDA is now projected at $1,465-$1,575 million versus the prior estimated range of $1,365-$1,515 million. Net income guidance was narrowed to $600-$700 million from the prior outlook of $600-$750 million.

Net cash from operating activities is now expected at $1,025-$1,125 million, while capital expenditures are forecast at $260-$280 million. Adjusted free cash flow guidance increased to $745-$865 million from the previous estimate of $655-$805 million.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Allison Transmission has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Allison Transmission has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.